JACKSON, MI – The state was right to order Consumers Energy to refund $36 million to offset a residential rate increase after a power plant sale, according to a court ruling this week.

However, The Michigan Public Service Commission should not have authorized the Jackson-based utility to collect funds to support an assistance program for low-income families, according to a decision issued by the Michigan Court of Appeals.

The court issued its decision this week on a case in which several parties -- including the Attorney General’s office and the Michigan Municipal Coalition – argued that the MPSC improperly allocated refunds to customers and approved a tool that would reduce the utility's dependance on sales for revenue.

The Association of Businesses Advocating Tariff Equity (or ABATE) and the Municipal Coalition challenged MPSC’s decision regarding a refund after Consumers Energy sold its Palisades Power Plant in 2007.

Before the sale, the company had been collecting a surcharge from all customers that would pay for the eventual shutdown of the plant, according to the case. Once the plant was sold, Consumers Energy was relieved of that expense and determined to refund the money that was collected.

On May 12, 2009, the MPSC ordered Consumers to provide a partial refund of the remaining Palisades money of $36 million to offset the company’s self-implemented rate increase for residential customers.

The Court of Appeals affirmed MPSC’s order and said it did not need to be reversed.

On a separate note, the court found that the commission exceeded its authority by allowing Consumers Energy to adopt a revenue decoupling mechanism. This tool was adopted as a way to get rid of disincentives for utilities when promoting energy-efficiency programs (or promoting customers to reduce energy use).

In April, the commission ordered Consumers to refund $17.5 million to its electric customers and $7.9 million to its natural gas customers. The money was determined to have been collected for the assistance fund.

The commission has already dealt with the issues outlined in the case, including getting rid of revenue decoupling and refunding money from the Low Income and Energy-Efficiency Fund to customers, spokeswoman Judy Palnau said.

“All of that is already underway at the commission or has already been dealt with,” she said. “There is really nothing new here.”